The book is organized around three main themes, Enterprise systems, E-business and Controls and how these systems and the controls for these systems related to the study of accounting of information systems. Below are definitions and examples of these three themes:
Enterprise Systems - systems that integrate the business process and information from all of an organization's functional areas, such as marketing and sales, cash receipts, purchasing, cash disbursements, human resources, production and logistics, and business reporting.
E-Business - the application of electronic networks to undertake business processes between individual and organizations. These processes include, interaction between back-office processes, such as distribution, manufacturing, and accounting; and front office processes, such as those that connect an organization to its customers and suppliers.
Controls - a process - effected by an entity's board of directors, management, and other personnel - designed to provide reasonable assurance of in the following categories: efficiency and effectiveness of operations, reliable reporting, and compliance with applicable laws and regulations.
Challenges and Opportunities:
Being a CPA is much different today then it was 20 years, 10 years or even 5 years ago. Instead of the green eye-shaded bean counter, accountants today have much more dynamic roles. Not only has the role of the accountant changed but the environment in which accountants work has changed and continues to change rapidly. This rapid change in business environments, driven by Information Technology, does not appear to be slowing down. Thus presenting the CPA of today and tomorrow with new challenges and opportunities. Below these are described:
Broad View of AIS:
The AIS wheel consists of 10 elements, these can be defined as:
Technology – Technology provides the foundation on which AIS and business operations rest
Databases – an accountant must be able to access and use data from public and private databases
Reporting – to design reports generated by an information system the accountant must know what outputs are required or are desirable
Control – you must develop an understanding of control that is specific to the situation at hand yet adaptable for the future.The means by which we make sure the intended actually happens
Business Operations – many AIS inputs are from operating departments and many AIS outputs are used to manage these operations, therefore we must analyze and manage an AIS in light of the work that is being performed
Events Processing – Data about events must be captured and recorded to monitor the business operations
Management Decision Making – the information used to make a decision must be tailored to the type of decision under consideration
Systems Development and Operation – these information systems must be efficiently designed, implemented and operate effectively
Communications – accountants must possess strong communication skills in order to effectively present their results and findings
Accounting and Auditing Principles – in order to design and operate the accounting system an accountant must know the proper accounting procedures
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Narrow View of AIS:
Here we focus on the accounting information system itself (the database, the ERP system, the information system)
Systems and Subsystems
-system - set of interdependent elements that together accomplish specific objectives
-subsystem - interrelated parts that have come together, or integrated, as a single system named 1.0
Information Systems Model
Management Information System - man made system that generally consists of an integrated set of computer based and manual components established to collect, store, and manage data and to provide output information to users.
Accounting Information System - collect, process, and report information related to the financial aspects of business events
Logical Model of a Business Process:
Management Uses of Information:
Data vs Information:
Mirrors and monitors
Support management activities
Recognize and Adapt
Qualities of Information:
Statement of Financial Accounting Concepts No 2: Qualitative Characteristics of Accounting Information
Understandability enables user to perceive the information’s significance
Timeliness – information that is available to a decision maker before it loses its capacity to influence a decision
Predictive Value – improve the decision makers capacity to predict, confirm, or correct earlier expectations
Relevance – when information is capable of making a difference in a decision making situation by reducing uncertainty or increasing knowledge for that decision
Verifiability – high degree of consensus about the information among independent measurers using the same measurement methods
Neutrality (freedom from Bias) – information is objective
Comparability – information quality that enables users to identify similarities and differences in two pieces of information
Consistent – information compared about the same object or event at two points in time
Accuracy – the correspondence or agreement between the information and the event or object that the information represents
Completeness- the degree to which information includes data about every relevant object necessary to make a decision
Management Decision Making:
Herbert Simon - 3 step Process
Intelligence - searching the environment for conditions calling for a decision
Design - invneting, developing, and analyzing possible courses of action
Choice - selecting a course of action
Operational Management Requirements
Tactical Management Requirements - requires information that focuses on relevant operational units and is more summarized, broader in scope, and need not be as accurate as the information used by operations management
Strategic Management Requirements - requires information to assess the enviorment and to project future events and conditions
Vertical information flows
Horizontal information flows
Structured vs Unstructured
structured decisions - those for which all 3 decision phases (intelligence, design, and choice) are relatively routine or repetitive
unstructured decisions - those for which none of the decision phases are routine or repetitive. (a manager's decision making process when choosing what research and development projects to undertake in teh next year)
Main Themes:
The book is organized around three main themes, Enterprise systems, E-business and Controls and how these systems and the controls for these systems related to the study of accounting of information systems. Below are definitions and examples of these three themes:Enterprise Systems - systems that integrate the business process and information from all of an organization's functional areas, such as marketing and sales, cash receipts, purchasing, cash disbursements, human resources, production and logistics, and business reporting.
E-Business - the application of electronic networks to undertake business processes between individual and organizations. These processes include, interaction between back-office processes, such as distribution, manufacturing, and accounting; and front office processes, such as those that connect an organization to its customers and suppliers.
Controls - a process - effected by an entity's board of directors, management, and other personnel - designed to provide reasonable assurance of in the following categories: efficiency and effectiveness of operations, reliable reporting, and compliance with applicable laws and regulations.
Challenges and Opportunities:
Being a CPA is much different today then it was 20 years, 10 years or even 5 years ago. Instead of the green eye-shaded bean counter, accountants today have much more dynamic roles. Not only has the role of the accountant changed but the environment in which accountants work has changed and continues to change rapidly. This rapid change in business environments, driven by Information Technology, does not appear to be slowing down. Thus presenting the CPA of today and tomorrow with new challenges and opportunities. Below these are described:Broad View of AIS:
The AIS wheel consists of 10 elements, these can be defined as:- Technology – Technology provides the foundation on which AIS and business operations rest
- Databases – an accountant must be able to access and use data from public and private databases
- Reporting – to design reports generated by an information system the accountant must know what outputs are required or are desirable
- Control – you must develop an understanding of control that is specific to the situation at hand yet adaptable for the future. The means by which we make sure the intended actually happens
- Business Operations – many AIS inputs are from operating departments and many AIS outputs are used to manage these operations, therefore we must analyze and manage an AIS in light of the work that is being performed
- Events Processing – Data about events must be captured and recorded to monitor the business operations
- Management Decision Making – the information used to make a decision must be tailored to the type of decision under consideration
- Systems Development and Operation – these information systems must be efficiently designed, implemented and operate effectively
- Communications – accountants must possess strong communication skills in order to effectively present their results and findings
- Accounting and Auditing Principles – in order to design and operate the accounting system an accountant must know the proper accounting procedures
----Narrow View of AIS:
Here we focus on the accounting information system itself (the database, the ERP system, the information system)Systems and Subsystems
-system - set of interdependent elements that together accomplish specific objectives
-subsystem - interrelated parts that have come together, or integrated, as a single system named 1.0
Information Systems Model
Management Information System - man made system that generally consists of an integrated set of computer based and manual components established to collect, store, and manage data and to provide output information to users.
Accounting Information System - collect, process, and report information related to the financial aspects of business events
Logical Model of a Business Process:
Management Uses of Information:
Data vs Information:
Mirrors and monitors
Support management activities
Recognize and Adapt
Qualities of Information:
Statement of Financial Accounting Concepts No 2: Qualitative Characteristics of Accounting Information
Management Decision Making:
- Herbert Simon - 3 step Process
- Intelligence - searching the environment for conditions calling for a decision
- Design - invneting, developing, and analyzing possible courses of action
- Choice - selecting a course of action
- Operational Management Requirements
- Tactical Management Requirements - requires information that focuses on relevant operational units and is more summarized, broader in scope, and need not be as accurate as the information used by operations management
- Strategic Management Requirements - requires information to assess the enviorment and to project future events and conditions
Vertical information flowsHorizontal information flows
Structured vs Unstructured